Paper to be presented at the DRUID Summer Conference 2007 on
APPROPRIABILITY, PROXIMITY, ROUTINES AND INNOVATION Copenhagen, CBS, Denmark, June 18 - 20, 2007
DEVELOPMENT DYNAMICS AND CONDITIONS FOR NEW ENERGY TECHNOLOGY SEEN IN AN INNOVATION SYSTEM PERSPECTIVE Mads Borup
[email protected] Birgitte Gregersen Department of Business Studies, Aalborg University
[email protected] Anne Nygaard Madsen Systems Analysis Department, Risø National Laboratory
[email protected]
Abstract: This paper presents an analysis of the dynamics and conditions of energy technology development in Denmark seen in an innovation system perspective. The employed system approach to energy technology development and innovation integrates the perspectives of both a national (general) innovation system approach and a technology-specific innovation system approach. The study focuses on five specific technology areas: bioenergy, hydrogen, wind, solar cells and energy-efficient technologies. A main result of the analysis is that the five selected energy technology areas are diverse in a number of innovation-relevant issues like actors, institutional structure, maturity, and connections between market and non-market aspects.
JEL - codes: O, Q, -
February 2007 Paper for the DRUID 2007 Summer Conference
Development dynamics and conditions for new energy technology seen in an innovation system perspective Abstract This paper presents an analysis of the dynamics and conditions of energy technology development in Denmark seen in an innovation system perspective. More specifically, the employed system approach to energy technology development and innovation integrates the perspectives of both a national (general) innovation system approach and a technology-specific innovation system approach. The study focuses on five specific technology areas: bio fuels, hydrogen technology, wind energy, solar cells and energy-efficient end-use technologies. A main result of the analysis is that the five selected energy technology areas are quite diverse in a number of innovation-relevant issues like actor set-up, institutional structure, maturity, and connections between market and non-market aspects. However, there are also some important similarities between the 5 areas. The analysis shows that a discussion of dynamics and conditions of innovation in the energy area needs to be sensitive to the specific technology areas.
1. Introduction The energy area has undergone considerable change in the recent decades. Following the marketorientation and liberalisation, today the area to a larger extent appears as an industrial area of private business and development, while it previously was seen as a publicly operated system and infrastructure. At the same time, societal and global important issues like international security, self-sufficiency and independence, severe climate problems, and efficient economic development are closely connected to the energy area. It is a general understanding that development in energy technologies are needed in order to improve the energy systems and solve the problems related to them. Over the latest years, a considerable increase in focus on the energy area as an important field of economic activities, employment and exports has occurred in many countries, and innovation and technology development in the energy area are currently among the most frequently discussed subjects in general within policy, media and general business development discussions. This paper presents an analysis of the dynamics and conditions of energy technology development in Denmark seen in an innovation system perspective. More specifically, the employed system approach to energy technology development and innovation integrates the perspectives of both a national (general) innovation system approach and a technology-specific innovation system approach. The study includes a comparative analysis of five technology areas: bio fuels, hydrogen technology, wind energy, solar cells and energy-efficient end-use technologies. The paper presents a comparison of the five technology areas along two overall dimensions: The maturity of the area with respect to industrial networks, market application etc. and central elements of learning across institutional borders. The latter relates to among other things the demand and need-driven innovation and the integration between market mediated and non-market mediated activities. The technology areas are compared with respect to the character of the actor landscape, maturity concerning market application and industrial networks, knowledge collaborations, resources like education and public R&D funding and policy efforts. It is concluded that there is considerable
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diversity between the energy technology areas concerning actor landscape, maturity and interplay between market and non-market activities. Significant differences are moreover found concerning the focus on commercialisation and business development in connection with the public support and regulation efforts. There are however also a number of important common aspects across the technology areas concerning the need formulations and the dialogue across institutional borders. The policy implications of the findings are discussed, suggesting policy efforts that are sensitive to the individual energy technologies and the differences in market maturity. However, it is also important that the policy efforts on a number of points like e.g. conditions for system integration and the impacts on climate are equal across technology areas ensuring competition and fair selection between technologies. There is need for increased and continuous focus on coordination and strategic combinations of different policy instruments.
2. Technological innovation system as the analytical framework National, sectorial, or technological innovation systems Innovation system studies have shown that the conditions for development and innovation are not identical across geographical and political-administrative borders but differ according to the specific constitution of the knowledge production, learning and institutional set-up in different countries and industrial sectors. Differences between the competitive and innovative strengths of countries and regions are ascribed to differences in the learning dynamics and the specific organisation of the knowledge production in the innovation systems and differences in the institutional set-up and industry sectors’ characteristics. The system character of innovation systems refers to the fact that development and innovation appear in interplay between different actors e.g. companies, their customers and suppliers, research and educational institutions, authorities, interest organisations etc. It not only depends on the capabilities and resources of the individual actors. Learning, i.e. informal and formal knowledge production, is the central, general activity in innovation systems. Thus an innovation system can be defined as “the elements and relationships, which interact in the production, diffusion and use of new and economically useful knowledge” (Lundvall 1992, p. 12). Conditions for the developments are influenced by labour markets, educational systems, industrial structure, competitive regime, regulation, collaboration, etc. The strengths of the innovation systems depend on whether there is a kind of efficiency in the systemic interplay where synergies between different activities are gained. In addition to formal knowledge production, e.g. universities, research departments, innovation system studies have pointed to the importance of informal knowledge production, e.g. knowledge gained through practical work, experiments, prototyping etc. (learning-by-doing) and knowledge gained in interaction with markets and users (learning-by-using (Lundvall 1992), lead markets, lead-users (von Hippel 1988)). Learning-by-interaction is in general important in innovation systems e.g. also between industry and research, between manufactures and suppliers. The significant importance of tacit knowledge as part of the explanation of the context-dependent character of innovation systems is clear (Polanyi 1966, Asheim 2005). A number of branches within innovation system studies have appeared. Among these are in addition to the general, national IS approach (Freeman, Lundvall 1992, Nelson 1993, Edquist 1997), the approaches of sectoral innovation systems (Breschi & Malerba, Malerba 2002), technology-specific innovation systems (Jacobsson & Bergek 2004, Hekkert et.al. 2006, Carlsson & Stankiewicz
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1991). 1 There are considerable overlap and similarities between the branches, however also some important differences. For our purpose of studying the conditions for new energy technology development, an approach is chosen that follows the technology-specific innovation system without loosing the insights of the more general innovation system approaches of NIS and SIS. This is explained below. In the sectoral innovation studies it is shown that there are considerable differences between economical sectors with respect to e.g. market structures, industrial networks, regulation and that the character of innovation activities therefore also differs. A sector is characterised by its basis technologies and its knowledge base. The specificities of the technological regimes and the knowledge base of the sector provide a restriction on the patterns of learning, competence development, behaviours and organization of innovation activities (Malerba 2002, p. 253). Though changes in the technological regimes may occur, technologies are in the sectoral approach primarily seen as a precondition and underlying structure and not as an outcome of the innovation systems. Contrary to this, it is in the technology-specific innovation system studies argued that if one wants to get insight in technological change and the evolution of technological systems, an approach that is more sensitive to specific technology areas under development is needed. The national and sectorial approaches are mostly too static in this respect and not attentive to the development dynamics (Jacobsson & Bergek 2004). Moreover, the NIS and SIS studies are often focusing on the macro level with less attention to the micro level. This is, for example, the case in a number of studies focusing primarily on the overall institutional structure in innovation systems (Hekkert et.al. 2006). Clearly, in studies of national innovation systems the complexity is quite extreme, due to vast amounts of actors, institutions, sectors etc., and it is difficult to have specific attention to the dynamics of evolution of technological systems. In addition, it is pointed out that technology development is usually not embedded exclusively in the institutional infrastructure of just a single national, regional or sectoral innovation system. Often there are important learning and knowledge connections across national and sectoral borders for example in the sense of integrating analytical knowledge produced in many areas of the world. Figure 1 shows schematically the relationships between technology-specific innovation systems and national and sectoral innovation systems.
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Regional innovation systems (Cooke 2004, Storper, Asheim & Gertler 2004) is a fourth branch of innovation systems studies. It will not be discussed further here.
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Figure 1: Relations between national, sectoral and technology specific innovation systems (Hekkert et.al. 2006).
Technological systems are to a larger extent defined in terms of knowledge or competence flows rather than flows of ordinary goods and services. They consist of dynamic knowledge and competence networks. Still, the international connections can often, e.g. in case of using scientific knowledge produced in different parts of the world, be less complex and with less tacit knowledge embedded, than in the national and sectoral interactions. Therefore, in many cases it makes sense to do studies of technology-specific innovation systems in individual countries, however with awareness of the international connections. Moreover, though it is often the case that developing technology areas have connections to a number of different sectors, there is often one sector that is more central to the technology than others. This is for example true for wind power technology which connects to the sectors of construction, IT etc. but still has the energy sector as the sector it is primarily embedded in. Our conclusion on this is that energy technology development is to a large extent influenced and shaped by the conditions in the energy sector in general, however, also by more technology and innovation-specific conditions including e.g. general innovation policy, educational systems etc. A simple illustration of this is shown in Figure 2.
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Figure 2: Illustration of the overlap between general conditions of the energy area and innovationspecific conditions for energy technology development. General conditions – energy sector
Technology and innovation-specific conditions
We apply a more technology-sensitive approach integrating elements of the general (national) innovation system approach and the technology-specific innovation systems studies that have occurred in recent years. The innovation systems with respect to the analysed energy technology areas are not seen as something completely separate from the energy sector as such; on the contrary the framework conditions in the sector are very important structuring elements for the opportunities for innovation in new energy technologies, but as something also partly departing from these framework conditions, influenced by conditions in other areas more specifically related to the knowledge development, innovation opportunities etc. in each individual technology area. This is illustrated by the overlapping frames in Figure 2. There are also some limitations of a technology-oriented approach. The limitation of the technology-specific innovation system approach is that it can tend to become narrowly focused on the single technology area and overlook the more general patterns and thereby not be capable of giving insight also in the general conditions for innovation and technology development in the energy area. If one should only describe the development of a specific technology, the technologyspecific approach would be to prefer, however if one wants insight in the conditions for technology development across individual technologies, elements of the sectoral and national approaches to innovation systems are still relevant.
Maturity and functions in technology-specific innovation systems Like in other innovation system approaches actors, networks, and institutions are main elements in technology-specific innovation systems. A very important part of the actor set-up is the ‘advocacy coalitions’ of actors working for the development and use of the technology (cf. ‘system builders’ of technological systems (Hughes 1987)). A technology-specific innovation systems can to a large extent be defined by these “dynamic network(s) of agents interacting in a specific economic/industrial area under a particular institutional infrastructure for the purpose of generating, diffusing, and utilizing technology” as Carlsson and Stankiewicz have put it (1991, p. 93). However, normally also actors which are not more or less dedicated to developing the technology influence the development dynamics and are part of the innovation system.
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The maturity of the systems has been pointed to as an important issue as there are significant differences in the characteristics of mature and immature systems (Jacobsson & Bergek 2004, Foxon et.al. 2005). Maturity is an overall concept that on an aggregated level accounts for a number of the central issues in the innovation systems. It reflects maturity in industrial networks, knowledge networks and institutionalisations as well as maturity with respect to application and markets dissemination and thereby also the technological maturity. That it makes sense to talk about a general maturity of an area indicates the interwoven character. On the overall level, two situations, or stages can be identified: 1. Formative character 2. Market dissemination character While the former situation is usually characterised by relatively few actors and no or only limited niche application of the technology, the latter has relatively many and different types of actors and involved application on larger markets. Usually, in contemporary society the latter situation includes industrial companies as one of the most central actor types, while the formative situation typically have different types of actors e.g. governments, scientists, interest organisations as the leading actors. The two types of situations are of course idealised situations and many in-between situation occur. Transformation from one situation to another is however very complex and often long-lasting processes. In the TSIS studies a number of ‘functions’ that are central in development of new technology areas are identified. The functions are types of activities seen on an aggregated level. The functions are overlapping and should not be understood as mechanical, functionalistic elements. Different more or less similar suggestions of the precise set of functions have been suggest (Jacobsson & Bergek 2004, Johnson & Jacobsson 2001. Bergek et.al. 2005 and Hekkert 2006 include comparisons of sets of relevant functions identified in different studies.) It is worth noting also that there are considerable similarities between the functions in the TSIS approach and the central types of activities in general (national) innovation systems pointed to by Edquist (2005). The five functions are (following Jacobsson & Bergek 2004)): 1. Knowledge production and dissemination; as in other IS approaches including learning and entrepreneurial experimentation 2. Guiding of the direction of search processes; explicit vision creations, strategies, policies and legitimation as well as implicit expectations and tacit perspectives in the knowledge developments 3. Formation of markets; i.e. definition, development, institutionalisation and regulation of markets – often also includes development of niche markets and niche applications 4. Mobilisation of resources; competences, labour and financing 5. Creation of positive external economies; includes e.g. establishment of supporting consultancy businesses, development of industrial structure and sub-supplier networks etc.; the economical value creation can be both market and non-marked mediated. The functions generally appear in the development of new technology area, at least if they shall become of any significance, be successful and get widespread application and maybe, ultimately, change the existing technology regimes in the sector. The specific interactions and development can
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within these functions take on many shapes and many patterns are possible. Hekkert et.al. (2006, p. 14) have identified three frequently occurring dynamics of change that often pull other system functions. These are as illustrated in the figure: Loop C, where governmental goals building on identified societal problems guide knowledge creation resulting in increasing expectations about certain technology options for solutions; Loop A, where leading actors argues for and legitimise new market formations and application; Loop B, where leading actors argues for more resources to perform research and development activities, again leading to increase in expectations. 2 The loops usually appear in some kind of combination with each other.
Figure 3: Illustration of three frequently occurring change dynamics, or ’motors of change’
(Hekkert et.al. 2006, p. 14).
The systemic perspective on technology development and innovation It is worth noting that there is a common understanding in the areas of innovation system studies and social studies of technology development (e.g. Hughes 1987, Bijker & Law 1992, Geels 2002). The two analytical areas have developed in parallel since the mid 1980s and been in fruitful dialogue with each other. Both analytical areas stress the importance of looking at technological change in a system perspective. The establishment of technologies are extremely complex processes usually going on for years or decades and involving a multitude of actors. It is rather characterised by incremental steps than radical changes or linear developments form inventions or scientific findings. There is often far from technologists or scientists claim that a technology exists and works in the laboratory to an actual working technology in practice. Actual application of a technology and the existence of actual user of the technology is thus a prerequisite for talking about realisation of a new technology. 2
On the role of expectations in knowledge production and technological innovation see (van Lente 1993, Brown et.al.
2001 and Borup et.al. 2006).
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Similarly, with innovation which as term is partly overlapping with technology (but broader). If one wants to understand which innovations that becomes of larger influence than others and maybe even shows to be of significance at a societal level, innovation must be understood on a system level. The number of studies employing explicitly a system innovation perspective is increasing (e.g. Hofman et.al. 2004). Innovations that matter - seen in a broader perspective - consist in a huge and complex amount of interactions and knowledge developments involving large numbers of smaller incremental innovations (micro innovations) of different kinds e.g. organisational innovations, market innovations, technical innovations, production innovations, and process innovations. Also institutional innovations and regulatory innovations, or in the case of the energy area, energy system innovations and infrastructure innovations are sometimes included among the type of innovations. It is this broad understanding of innovation we use. We are here in line with most innovation system studies, although other branches within the larger field of innovation studies explicitly or implicitly employ a more narrow understanding of innovation. To sum up, the analysis of conditions of energy technology development in Denmark employs a hybrid perspective building on the TSIS approach and its function as well as the more general findings within innovation system studies about learning through interaction between actors, networks, and institutions. We present the results along two main dimensions: The maturity of the technology areas and learning across institutional borders. The latter relates to among other things the demand and need-driven innovation and the integration between market mediated and nonmarket mediated activities. The understanding by the technology developers of the demands and needs is an important aspect. A continuous and qualified learning about the needs is a central issue in the well-functioning of the innovation system and part of the guiding of the search processes. In many cases the learning is broader and more detailed than reflected just through the market prices on existing markets. The understanding also concerns for example the energy systems and infrastructure as such and the broader societal needs and policies in the field. Thus the understanding about the demands and needs can be created also through other channels than market contact. In areas that have formative character and are not in a market-dissemination situation, the role of other ways of understanding the needs than through market interactions are of course of larger importance.
3. Empirical study – findings from 5 energy technology areas [COMMENT: IT IS EXPECTED THAT RESULTS FROM A QUESTIONNAIRE SURVEY ON COLLABORATION AND INTERPLAY BETWEEN THE ACTORS IN THE 5 ENERGY TECHNOLOGY AREAS WILL BE READY FOR THE FINAL VERSION OF THE PAPER. INCLUDING THIS WILL OF COURSE CHANGE THE EMPIRICAL SECTION AND THE FINAL CONCLUSION. THIS PART OF THE STUDY IS DONE IN COLLABORATION WITH THE DANISH ENERGY INDUSTRY ASSOCIATION AND WILL PROVIDE NEW INSIGHT IN TECHNOLOGY AND MARKET FORMATION ACTIVITIES]
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Energy technology as an important industrial field Like in a number of other countries, there has in Denmark been an increasing focus on the energy area as an important economic field and innovation area. Export of energy technology and equipment from Denmark was in 2005 38.7 billion DKK (Ahm et.al. 2006, p. 26). It has increased considerably over the last 10 years and makes up around 7% of the total Danish export (2005 figures). Figure 4: Development in exports of energy technology and equipment compared to the general export development.
Index, 1996=100 250
250 Energy technology and equipment
200
200
150
150 Total exports of goods
100
50
100
96
97
98
99
00
01
02
03
04
05
50
Danish export of technology and equipment with energy purpose, source: Ahm et al. 2006 (Energiindustrien and Energistyrelsen, building on figures from Eurostat).
The growth in Danish exports from 1996 to 2005 is around 150% and thus considerably higher than other EU countries (apart from Greece who’s export in absolute figures however only accounts for 1/8 of Denmark’s). The export growth in the same period for EU in total is 72% (EU15). The export of energy technology and equipment from Denmark is dominated by the fast growing wind energy area (70%) with energy efficiency technology (18%) as the second most important area. Export of combined heat & power products has decreased since the mid 1990s and now constitutes only 3%. The export primarily goes to countries in North-West Europe (70%) and to Asia and USA/Canada (around 12% to each). The significant developments in the Danish energy area, not least the success of wind energy but also the developments within energy efficiency have created considerable interest from abroad in the dynamics in the energy area in Denmark. The interest both comes from business actors, policy makers in the energy area, and environmentally concerned actors.
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The five technology areas selected for analysis are among the currently eight areas where a specific national strategy exists. These strategies are used for prioritisation within the national research and development programmes. Together, the five areas constitute a considerable part of the national energy development efforts and, as it appears, the emphasis on technology is quite significant in the programmes. The areas are bio fuels, hydrogen technology, wind energy, solar cells and energyefficient technology. Table 1 shows the Danish priorities within the national research and development programmes compared to a number of other countries, including the total energy R&D budget in absolute figures and relatively to GDP for the year 2005. Table 1: Distribution of Public R&D spending in different countries. 2005 figures.
Energy Efficiency
Solar Energy
Wind Energy
BioEnergy
Hydrogen
Fuel cells
Other Energy RD&D
TOTAL RENETOTAL WABLE ENERGY ENERG RD&D Y RD&D
Percentage of total Energy RD&D
1,000 €
TOTAL ENERGY RD&D / GDP* ‰
Denmark Germany Norway Spain Sweden Switzerland United Kingdom United States Canada Japan
8.1 4.7 3.9 6.4 31.3 11.9
5.1 14.1 1.7 23.3 1.4 16.5
15.7 4.1 1.6 15.5 0.5 0.8
16.7 2.9 1.4 7.3 22.0 4.1
3.3 0.1 9.4 0.0 3.2 1.5
23.0 5.1 1.6 0.0 1.7 5.7
26.1 66.0 78.9 46.4 38.4 55.2
39.5 24.1 6.3 47.2 25.4 25.8
60,849 413,165 69,146 47,058 48,256 125,137
0.30 0.18 0.30 0.05 0.17 0.42
0
20.1
23.4
5.8
2.1
1.3
45.4
51.2
104,573
0.06
12.1
2.8
1.4
2.7
3.1
2.6
74.1
8.0
2,429,302
0.24
15.6 11.9
2.9 3.7
1.5 0.3
5.6 1.9
5.0 0.0
6.2 0.0
61.9 80.8
11.3 7.3
240,609 3,143,755
0.27 0.87
Est. IEA total
11.2
5.2
1.7
3.1
1.3
1.6
74.2
11.6
7,716,988
0.38
Own account, building on IEA statistics, www.iea.org/rdd. *) World Bank.
Findings from the 5 energy technology cases Neither solar cells, wind energy, hydrogen technology, energy efficient end-use technologies nor bioenergy are completely new subjects in the energy area. Activities and discussions about them have taken place for many years and they have all with larger or smaller weight been part of the strategic considerations about the development in the energy sector. On national level in Denmark, four of the areas have for more than a decade been among the areas prioritised for support through research and development programmes. The exception to this is hydrogen technology and the idea of building a hydrogen-based infrastructure partly in replacement of oil and electricity, which as individual priority area appeared in the beginning of the new millennium. However, also on this technology analytical and technical development activities had occurred earlier e.g. through the closely connected area of fuel cells. As industrial areas and areas of innovation, the five technology areas have developed quite differently and they appear today with considerable variety between them. This is described in the following, first focusing on the actor landscape and maturity characteristics and thereafter with focus on aspects of interplay across institutional borders.
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The actor set-up of the areas varies on the one hand with energy efficient technology and wind energy as the two ‘larger’ areas where the number of actors shall be counted in hundreds and on the other hand the three ‘smaller’, bioenergy, solar cells and hydrogen where only few actors exist. Bioenergy is closely related to the traditional actors of the energy systems: the power plant companies and network operators (what we here call. Many of the development activities, experimentations and demonstration projects take place in connection to the existing plants and facilities. In addition to the consultancy units within the utility companies, other consultancy companies and (often relatively small) companies within the engine industry characterise the area. Also companies and research institutions within biotechnology as well as research institutions within e.g. agriculture/forestry and mechanical engineering are among the active in the area. Within the last couple of years a renewed focus on bio fuels for transport, instead of for heat and power, occurred. This field can to some extent be seen as relatively independent of the existing bioenergy field, though some actors e.g. from biotechnology companies and research are the same. The leading actor in this change is the European Union with its policy on replacing gasoline with bio fuels. Also some gasoline companies are in Denmark active on this and the international connections are more pronounced here than in the case of bioenergy for heat and power. The hydrogen area is the smallest area with respect to number of actors involved (around 30-40). The coalition of actors leading this field consists in policy actors on national level (in parallel to strategic initiatives of USA, EU, etc.), regional level and from the wind energy industry plus some of the research actors (public and private) in the fuel cell area. An innovation centre is established close to the wind industry in Vestjylland, due to possible synergies with the wind technology. A number of demonstration projects constitute a significant part of the activities so far. Actual application on commercial basis is not established. In light of that it is a complete and new infrastructure that is the vision with hydrogen technology, the demonstration projects are scattered and there are many unsolved and open questions. This also concerns which actors that will enter the area and fulfil the many different roles that are needed in such new systems. The networks and institutionalisation are not developed. Also on the developers’ side are the networks relatively scattered and undeveloped. The hydrogen is thus not mature and clearly has formative character. The research efforts on fuel cells are important in connection to the hydrogen area and on this point there is a relatively well-developed network between the research-oriented companies and the research institutions involved. In the Danish context the solar cells area is only in a formative stage in the sense that the price pr kW is still relatively high - although declining, the domestic market is limited and mostly dominated by demonstration projects with some public support. Despite a growing public interests and promising export markets (especially to Germany and Japan) solar energy is not given priority in the newest national energy strategy. The Danish solar energy strategy follows the overall EU minimum goal, corresponding to 1% of total energy consumption in 2010, see Table 3. The Danish wind energy area counts between 200-300 actors centred around 3 large companies. Innovation activities to a large extent take place in a well-developed value chain between the large producers of wind turbines and a multitude of suppliers forming a complex and expanding knowledge-base (Andersen & Drejer 2006). The innovative capability of the industry has developed through a complex interrelationship between demands from users and NGOs, companies, research institutions and public policies and strategic efforts. The Danish industry is among the leaders in the
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world market with market shares above 40 % through the last decades. A number of foreign wind turbine manufactures have established development units in Denmark and on many points the area appears as an industrial cluster. Globalisation and establishment of production plants in different parts of the world have been a part of the developments in the recent years. The Danish wind turbine industry has faced changes in the competition after multinational companies (GE, Siemens) has entered the industry. In addition entry of developers as new important market players has changed the competitive environment further. The domestic market has experienced stagnation in recent years limiting the opportunities for experimental applications of new solutions. The international markets are the most important currently. The market has moreover changed from one where private wind turbines guilds invested in single turbines to one where developers are coordinating customers for large wind farms. Co-operatives of small investors and NGOs have however also in connection with the establishment of the offshore power plants, as a strategic niche of significant importance currently, been among the leading actors. The area of energy efficient technology is a large and broad area that covers a wide range of activity areas, products and techniques meant for use within three main areas: industrial production, buildings, and private households. The activities are institutionalised in a number public programmes and regulations including information services and campaigns, energy labelling systems, regulations in specific sectors e.g. the building code, an Electricity Saving Trust, cleaner production programmes, standardisation and R&D programmes. The national Energy Plan and Energy Saving Act are the overall frames for the efficiency programmes and regulations and the Government has been central actor for the area. Within the programmes (and in some industry areas also independently of the programmes) industrial companies are important actors in large parts of the activities. Also a wide range of other actors are involved including electricity companies, research institutions, technology service institutes, consumer organisations, and NGOs. The innovation activities in the area are characterised by being problem-oriented and focused on applications and immediate reductions of the energy use. Most of the development projects do result in actual application and improvements. The efforts have been successful in the sense that a significant improvement of the energy efficiency in general is obtained. In international comparisons it is shown that the energy intensity, i.e. energy used per product unit produced, is very low in Denmark (the lowest in EU). While many permanent improvements in products and processes are obtained, the picture concerning commercialisation and business development is not as clear. In a number of cases, new successful products and product areas of considerable economical benefit for the business companies have been among the results. This has e.g. been the case within the areas of refrigeration, heating systems, and insulation. A significant part of the activities has however resulted in savings for the involved companies but not in new commercialisations. The conclusion of the analysis of the energy efficiency area is that it despite its extensive and distributed character which does not make it appear as one, united industry sector, is an area that in general is characterised by considerable maturity. The networking and the institutionalisations is strong and the connections between research and development activities are usually well-developed. From many of the companies operating on global markets it is indicated that there is increasing focus on energy efficiency as an important parameter of competition for their products. In Table 2 the characteristics concerning actors and maturity of the fields are shown. In our account of the number of actors in the area of energy efficient technology, we only included professional
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actors and only those directly connected to the public programmes on the field (in this way it is a more restrictive way of counting than used in the other technology areas). The number of actors in the innovation system of each technology area can only be an indicative estimation as the area are quite diverse and a common and precise definition of who to include therefore cannot be made. Moreover, no well-covering statistics of the business area of energy innovation exist as the area and its products are not among the traditional categories of industrial sectors and product groups in the statistics. 3
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A similar study of the UK innovation system with respect to energy technologies showed that the wind energy area had not reached the same degree of maturity as in Denmark. The situation concerning hydrogen technology and photovoltaics was like in Denmark with the former quite immature and long from wider application and the latter having reached some, but limited application. Similarly to Denmark bio energy appeared as an area that had been worked upon for many years and quite mature in many senses but without the wider application and market penetration one could expect given the long-lasting efforts.
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Table 2: Central actors and maturity in the technology areas – overview
Actors Key actors
Number of actors Maturity Application
Bioenergy
Energy Efficiency
Hydrogen
Solar cells
Wind
Government Utility companies Consultants Biotech research and companies (Biofuels: EU Gasoline companies) 30-50
Government Public authorities Industry Research institutions
Government (Public policy and R&D efforts) Regional authorities Wind industry
Industry Government NGOs
150-200
30-40
Government (Public policy and programmes) Utility companies NGOs Industry Universities TSI Consultants Consumers 40-60
A little
Application. Practice focus in development activities. Dependent on subfield; considerable in some; limited in others Considerable international markets in some subfields
No. (Demonstration projects)
Some (through support programmes)
Widespread application
No
Considerable dissemination, growing markets
Fuel cell technology
Limited – no well-established Danish market Demonstration projects Expanding int. markets for DK subcontractors (Germany, Japan etc.) Silicium Planning and installing Building integration System integration Materials Scattered networks, int. subcontractor networks Declining prices pr kW (“learning curve”)
Market dissemination
No
International vs. domestic market
No export
Niches
Bioenergy from waste and manure
Integration in other fields e.g.: - refrigeration - ventilation - insulation
Industrial maturity
Partly developed networks
Integrated in other Not developed industries
Change in maturity last 5 years
No
Formative or market ‘stage’
Formative
No clear tendency; Only small steps rise in business focus in some subfields Market Formative
-
200-300, centred around 3 large companies
Int. markets. Leading Danish market applications, but stagnation in recent years Mainstream (off shore wind)
Developed industry; strong wind power cluster, developed producer and user associations Internationalisation, globalisation of production
Formative, partly Market
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Table 3 summarizes elements of systemic interplay in the five technology areas including key public instruments for contribution to market formation. The systemic interplay in the energy innovation consists in both formal and firmly-structured collaborations and in more loosely coupled networks and forums. The latter is often as important as the former, though its’ impact is more difficult to document. The analysis in all the technology areas shows that apart from direct collaboration between actors (which will be touched upon below) the less formalised interaction and discussion is an important part of the activities. This among other things concerns development of a continuously qualified understanding among technology developers of the use context and the needs for the technology seen in a broader perspective. This guides and adjusts the direction of search and development activities. In connection with all technology areas many debate meetings, workshops and discussions take place. The many meetings also reflect that a considerable amount of interest organisations exists in the energy area on the specific technology areas as well as on more general energy issues. The interest organisations include e.g. a large number of industry associations, associations of energy providers, network operators, energy consumers, labour unions, NGOs, and interest groups on individual technologies of professionals within the fields as well as non-professionals. For example the engineers’ association, the Energy Industry (industry association), the net operators and energy distributors, and the energy authorities have all arranged a number of meetings and hearings within the last couple of years. Many of these meetings are public and with participation of people from many different kind of organisations. We will point to that the informal interaction and the many active interest organisations apart from ensuring a qualified understanding of the needs also contributes to the broader understanding of the technologies in the population. This can be seen from the fact that there is relatively high awareness in the population about the energy area compared to many other countries (see Euro Barometer figures in appendix). Moreover, the share of people in the population supporting solar cells technology, wind technology and bio energy is in top of the EU member countries (no figures on hydrogen, fuel cells). Also awareness and support of energy efficiency and renewables are high.
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Table 3: Elements of systemic interplay in the technology areas Bioenergy
Energy Efficiency Application, Policy
Hydrogen
Solar cells
Policy
Policy, int. markets, Markets, application experiments application, policy Some Yes
Main mediation channels for demands and needs
Policy
Interplay btw. market and non-market dynamics Debate and communication (information campaigns, workshops etc.)
No
Yes
No
Workshops, interest org.
Workshops
Education and training
Scattered
Information, campaigns, Workshops, interest org. Some
Public efforts (technology specific): Market support
No
No
No
Yes, e.g. labelling No systems Some No
Partly
No
Yes
Some emphasis (biofuels)
Some emphasis
Some emphasis
Public procurement (general No and strategic) R&D (mill. DKK, 2005) 77,7
Yes
No
37,1
15,7 (fuel cells 82,1)
Other central public efforts
Regulations, standardisations
Support of integration in energy system Commercialisation emphasis in efforts Energy Strategy Plan
Wind
Various activities (organized by different stakeholders), interest org. Scattered
Workshops, interest org.
No.
Yes, feed in tarifs Yes
Some, special netto tariff system Yes
Some
Yes
DK follows the EU strategy: 1% of total energy consumption in 2010 No special action
Emphasis
22,1
37,0
Building regulations Quality assurance system for solar technology systems
Certification system
No
Source of the public R&D figures: Energistyrelsen.
The communication between the use side and the development side also consists in marketmediated interaction, enabling the kind of efficiency and competition in the mutual integration of needs and opportunities that appear through this. The technology areas differ with respect to inclusion of both market-based and non-market based interaction dynamics. Market supporting policy instruments are used in the wind area and within energy efficient technology primarily. Explicit focus on commercialisation and business development is not a major element in the public efforts in relation to the energy efficiency area. As indicated also in Table 3, there are limited educational activities on the individual technology areas. Education in wind energy has to some degree been developed in recent years. Also in the area of energy efficient technology are there some higher education activities, while in the other areas it is relatively scattered. The findings are similarly scattered concerning more general energy-related educations. Compared to the important role the energy area has for society the amounts of educations on university level is surprising low. Education in the field of energy efficient technology is in addition to the above-mentioned characterised by an effort targeted at elementary
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school, in addition to the number information campaigns and information services for professional and private consumers. Knowledge collaboration supported by the public R&D programmes There are currently three public R&D programmes targeted at the energy area: 1. The EFP programme (Energy Research Programme) 2. The ENMI programme (Programme Commission on Energy and Environment within the Danish Council for Strategic Research) 3. The PSO programme (Public Service Obligations programme) The latter is financed through the so-called public service obligation tax on electricity while the two former are financed through the national budget. Many of the projects in the programmes also have considerable co-financing by the project partners.
Figure 5: Public R&D programmes – development in the budget in the technology areas biofuels, energy efficiency, hydrogen, solar cells and wind energy. Mio. DKK
90 80 70 60 50 40 30 20 10 0 2001
2002
2003
2004
Bio-Energy
Energy Efficency
Wind Energy
Fuel Cells
Solar Energy
Hydrogen
2005
(Source: Energistyrelsen 2006)
As Figure 5 shows, the public R&D spending on alternative energy technologies shows a turbulent picture after 2001 where the liberal-conservative government took over. Except for fuel cells all other areas have experienced severe cuts in 2002, but are recently and slowly recovering and reaching the 2001 level. Of the 386 projects running within the three public R&D programmes in the energy area by the beginning of 2007, 346 appear within one of the five areas selected for analysis. In Table 4, an analysis of the actor involvement and collaboration between business and research etc. is presented. Private companies are involved in a majority, around 75%, of the projects. Research institutions are involved in 60% of the projects and as the third largest category of actors comes ‘technology
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service institutes’ and similar innovation supporting organisations with involvement in around 25% of the projects.
Table 4: Number of projects in public R&D programmes – participants and collaboration. Types of actors involved (number of projects)
77
72
29
50
4
Other collab. across actor types 20
88
63
39
52
12
43
100
33
27
2
16
7
4
44
26 33 257
12 35 209
6 9 85
8 26 152
2 1 26
6 7 80
31 46 346
Business Research Bioenergy Energy efficiency Hydrogen and fuel cells Solar cells Wind energy Total
Total
Innv. supp. org. (TSI etc.)
Both business and research
Other privatepublic collab.
125
Running projects primo 2007 within the programmes PSO, EFP and ENMI. Own account building on DENP database 2007 supplemented with project information and organisation information materials. The innovation supporting organisations (‘Technological Service Institutes’ etc.) are considered neither public organisations nor private business companies. In the energy efficiency area, collaborations with these institutions account for a considerable share of the projects within ‘other collaboration’.
There is collaboration between private companies and public research institutions in many of the projects, 44%. To this comes a number of other private-public collaborations and collaboration between companies and TSI etc. The figures vary between technology areas, but show a relatively low number of business-research collaboration within solar cells. The relatively few collaboration projects in the area of hydrogen and fuel cells has to be seen in the light of that there in the fuel cells area exist two groupings or consortia each involving both business and research actors and that some one-actor projects go to the members of these consortia and thereby feed into the collaboration in them. There are also a number of examples of public authorities, interest organisations and NGOs involved in the projects. This is seen within solar cells, hydrogen technology, and energy efficient technology. The number of projects with these organisation types involved is much smaller than the number of projects with business and research organisations involved, however it is interesting concerning the interplay between demand and developers that they occur. (These numbers are not shown directly in the table, but reflected in the columns with ‘Other private-public collaboration’ and ‘Other collaboration…’). TO BE DEVELOPED IN THE FINAL VERSION WHEN RESULTS FROM THE QUESTIONNAIRE SURVEY ARE INCLUDED.
5. Conclusion The main result of the analysis is that the energy technology areas are quite diverse in a number of innovation-relevant issues like actor set-up, institutional structure, maturity, and connections between market and non-market aspects. Though there also are similarities, the analysis shows that
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a discussion of dynamics and conditions of innovation in the energy area needs to be sensitive to the specific technology areas. Despite globalisation and the international markets for the energy technologies, the connection to the local environment (industry, knowledge networks, energy systems and policies) is important. Dialogue across institutional borders and between private and public actors is significant and extensive compared to other countries. Despite this, policies stimulation coordination and networking is still important. The high degree of diversity between the different technology areas implies that an efficient innovation and energy policy has to take into account these differences. The policy has to be specific and reflect the variation in maturity. In areas like solar cells, where the market is formative, qualified demand – for instance in the form of strategic public procurement - is central for the technology to develop further. In areas like energy efficiency, where there are considerable markets within selected fields, indirect public policy support in form of for instance information campaigns may be very effective. The existing use and combination of different policy instruments varies considerable between the various energy technology areas. There is a need for a higher degree of coordination between the different policy initiatives. Synergy can be obtained by a strategic combination of different instruments (market and non-market based).
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Appendix Figure: Public opinions on selected energy technologies (source: EU 2007, Eurobarometer). In a third area analysed, biomass energy, Denmark appears as number five.
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